The failed Albertson’s merger has left Kroger in an enviable position, with a robust balance sheet and a commitment to shareholder value. Two years ago, Kroger temporarily suspended its share repurchase program to prepare for the acquisition. Now, with the deal off the table, the company is aggressively buying back its own shares, with a total commitment of $7.5 billion. This includes an accelerated program worth $5 billion, 80% of which has already been completed.
Kroger’s leverage is relatively low at around 2X equity, primarily related to past acquisition plans. The company also plans to reduce debt by redeeming $4.7 billion in senior notes in early 2024. Kroger’s strong financial position is expected to lead to sustained dividend growth, potentially earning it a spot in the Dividend Aristocrats index. Its dividend currently yields about 2%, paid out at less than 35% of earnings, and has increased at a double-digit CAGR for the past five years. Analysts generally view the failed merger as a positive outcome, as it removes uncertainty and allows Kroger to focus on its core strengths